Great article from Scale Venture Partners on the key metrics that a PE investor should look at when investing in SaaS companies. Key highlights include:

1. Revenue growth rates decline fairly predictably as absolute revenue scale increases. This means that revenue growth matters but it really is relative to how long the company has been in business. The top quartile revenue growth rate of 123 percent at a $20 million revenue run rate would represent bottom quartile growth at a $2 million revenue run rate.

2. There needs to be an efficient relationship between dollars invested in sales and marketing and dollars back via revenue.

3. As growth slows, the impact of churn escalates and provides an upper bound on how big a company can become.

4. And cash burn matters because - it simply does.

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The vital signs of SaaS are Revenue Growth, Sales Efficiency, Revenue Churn and Cash Burn. Almost everything that matters about the financial performance of a SaaS business is captured in these four metrics.